It is common for business owners who take care of bookkeeping tasks to commit mistakes. Some may not be too serious while others can be quite costly. These costly mistakes are usually committed when using accounting software.
Do-it-yourselfer business owners tend to create complex chart of accounts by including unnecessary information, which can be both time consuming and hard to read. Two or three page report is an indicator that you are putting unnecessary things on your Profit & Loss account. When creating a report, you need to keep it simple by reviewing how you list your accounts. For instance, individual accounts for expenses must be consolidated. You can classify them as motor vehicle expenses. If you intend to make changes to your Chart of Accounts, make sure you run it by your bookkeeper or accountant.
Once you have completed month end or quarter end period and lodged BAS, making changes to historical transactions must be avoided unless you inform your bookkeeper or accountant about it. The changes you make can create serious problems. One example is when you record a purchase of an item including GST. Eventually, you discovered that a mistake has been made after the month end has been completed. Since the item was purchased privately, it should not include GST. This means that the business owner should pay back the GST claimed for the item. Be sure to follow your bookkeeper’s advice when making changes. Most accounting software has an option to lock the period at a certain date to prevent changing historical transactions. This deters you from making any unnecessary changes to the transactions.
There can be a number of situations in which a business owner can use the wrong tax codes such as purchasing goods and services from overseas sources, insurance, vehicle registration expenses, legislations and so on. Your supplier should provide you a tax invoice, which shows the actual amount of GST that is payable. If you are purchasing goods or services from overseas countries that show tax on the invoices, make sure you consult with your bookkeeper. These non-Australian businesses are not considered eligible for claiming tax. In case you are unsure if there is GST on your purchased item, you can simply create a tax code called QUE GST Query at 0%. This way, you will be able to record the transaction and ask your bookkeeper or accountant to review the entry.
Peter Broberg is a bookkeeping professional with over 20 years experience in the finance sector. With more than 2 decades of experience, Peter provides payroll and bookkeeping services on a professional level. His services cater to small and medium enterprises in Cannington, Kalamunda.